A specialist trust deed provider has warned against the belief that family trusts might be a preferred investment vehicle over SMSFs due to the likelihood of proposed changes to the retirement savings system being implemented, now that the Turnbull government has been re-elected.
“Tax deductible contributions can only be made to superannuation funds, they cannot be made to family trusts,” Super Central said.
“Employer superannuation guarantee contributions can only be made to superannuation funds – they cannot be made to family trusts.”
In addition, Super Central pointed out the tax treatment of earnings within an SMSF remained more advantageous than that of a family trust.
“The investment income and any realised long term capital gain is taxed at 15 per cent and 10 per cent respectively during the period before retirement,” the document provider said.
“Even in retirement, for most investors the investment income and realised capital gains will be subject to zero tax, and for investors with very large pension balances, they will be taxed at 15 per cent and 10 per cent on the portion of the balance above $1.6 million.”
“These tax rates will generally be more advantageous for most family groups than the normal marginal rates even with the zero rate threshold.”
Super Central cited the lack of need for trustees to regularly distribute income to trust beneficiaries as a further advantage SMSFs had over family trusts.
It concluded while most of the proposed changes to superannuation included in the 2016 federal budget were negative, the tax benefits associated with SMSFs have not been entirely neutralised or eroded.